The Ottawa free trader. [volume] (Ottawa, Ill.) 1843-1916, 1887-10-29


The movement 70 increase the amount OF
public money that may be held by any one
national bank is one OF great importance,
and may foreshadow the establishment of
a new fiscal policy In connection with the
issue and maintenance of circulation.
Heretofore the practice of the Treasury has
been to limit the deposits of public money
In one bank 10 few hundred Thousand dol.
lars, and TO permit banks to hold but 90 per
cent of the face value Of the bonds depos-
tied u secure public deposits. This has
been changed, and deposits are now allow
ed 70 the full face value of the bonds depOs-
tied, and In cases where banks deposit one
million In bonds deposits to the amount of
Sl,lOO,0OO will be allowed Under this ar.
rangement the aggregate Of bonds held TO
secure public deposits has run up from
SOS, 100000 IN S3l 100000 within a few
days, the increase being in four per cents
Five banks in New York city have each
increased their bond deposits to 100000
In order TO secure additional deposits, and
banks In several of the large cities have re-
Gently added to their deposits for this pur.
pose. At the Treasury Department this
movement Is being watched with great in
terest. In adopting the new regulation the
only purpose of Secretary Fairchild was to
distribute the Treasury surplus so that it
might be used to promote the business in.
terests of the country. 1t Is now apparent
that 1t can be made to subservc this pur-
pose to greater extent than was contem-
plated. In discussing the movement, a
prominent Treasury official said to Phila-
delphia Ledger man:
There Is significance In the fact that
banks that are increasing their bonds to Sc
cure deposits are Withdrawing those held to
secure circulating notes. which, of course,
involves a surrender of national bank notes
TO the amount of bonds withdrawn. There
is so little profit In circulation, after deduct
Ing the tax Of one per cent, that any slight
advantage presented Is sufficient to induce
bank to surrender II In part maintaining
just sufficient to hold Its charter. Now here
Is chance to obtain circulation from the
Government, free of tax, by merely trans
fering bonds used to secure bank notes to
the account of bonds held to secure depos-
Its of public money. This was not any part
of the purpose of the Department in estab-
fishing the new regulation, but 1t Is one of
Its logical results. regard this as highly
important and significant. 1t is spon.
taneOus movement, evolved from the neces-
stiles and exigencies of the hour. The
Treasury holds large surplus, which Is
daily increasing. To withhold this from
business channels would be dangerous and
injurious, If not disastrous to the great bus
mess interests. BY depositing 1t with the
banks throughout the country, first obtain
| ing ample security, the wants of legitimate
trade and commerce may be promptly met
But the Significance of the movement lies
In the fact, that under II the banks become
practically banks of issue for the Govern
ment, and the circulating medium thus is.
sued Is the paper of the Government, and
not that of the banks. Might not this sug-
gest to Congress plan for new national
bank system, based on the circulation Of
United States nOtes?"